with Tom Still

Wisconsin remains ripe for more corporate venture capital

(page 1 of 2)

When the venture capital arm of American Family Insurance launched in 2013, AmFam Ventures was ahead of the curve in terms of corporate investing in that early-stage asset class.

Seven exits and more than 25 portfolio investments later, AmFam Ventures is one of the nation’s leading corporate investors in financial technology and “insure-tech” fields. It has solid in-state company in those business sectors with the likes of CFMG Ventures at CUNA Mutual and Northwestern Mutual Future Ventures.

Other companies in Wisconsin with in-house investment arms or related interests in startups include Kimberly-Clark, Logistics Health, ABC Supply, Aurora Advocate, and Direct Supply. That list could grow if other companies band together to join the venture capital trend.

A mechanism for those major companies to do so is called a “corporate fund-of-funds,” much like what was created in 2008 in Michigan and more recently in Cincinnati, Ohio. Michigan’s Renaissance Fund was initially funded by Ford, La-Z-Boy, and Whirlpool, and later added dozens more organizations. Cincinnati’s Cintrifuse launched with investments by Proctor & Gamble, Kroger, and Western & Southern and has grown, as well.

What is a corporate fund-of-funds? Quite simply, it’s a vehicle for pooling capital and investing in emerging firms, either directly or through other professional investors.

Such investments can target products or research related to core businesses of the participating companies. They can also invest in startups and scale-ups not related to the mission of the larger companies, but tied to the larger economy in that state, region, and beyond.

Corporate fund-of-funds can also attract money from elsewhere, often in the form of co-investments by traditional, stand-alone venture capital firms that tend to congregate on the East and West coasts.

That’s pretty much what happened in Michigan, which went from a venture capital also-ran to a leader over the past 10 years in terms of dollars invested, number of deals, and out-of-state investment.

Chris Rizik, the managing director of the Renaissance Fund, described the fund’s structure, investment experience, and results in early 2017 at the invitation of the Wisconsin Technology Council. He described Wisconsin as “poised” for such a fund. The Tech Council most recently cited the benefits of such a fund with the release of its 2018 white-papers report, “Pathways to Success.”

“We have 1.78% of the nation’s population, conduct 1.89% of the nation’s academic research, and generated 1.64% of the nation’s patents,” the report reads. “However, we have 0.21% of the nation’s venture capital under management and our state’s companies raised 0.35% of our nation’s venture capital.”